UR’s advice for President Musharraf

I am not a Pakistani. Nor am I closely familiar with events in Pakistan. But it strikes me, just on a casual perusal of the papers, that if your constitution were a nuclear reactor, it would be Chernobyl. If it was a bassist, it would be Sid Vicious. If it was a ship, it would be the Edmund Fitzgerald. Etc, etc, etc. While a leaky reactor, a homicidal rhythm section, or an overloaded ore carrier are not exactly things you want in your living room, each one beats the hell out of a malfunctioning constitution.

And do you really want to go in there with a wrench? Just toss the thing. History is littered with discarded failed constitutions. The failure of the Pakistani constitution does not reflect in any way on the residents of Pakistan. It reflects on whoever wrote the Pakistani constitution. In fact, it doesn’t even reflect on them. It’s an engineering failure. It happens.

Two, abolish politics in Pakistan. Politicized democracy in the Indian subcontinent has failed. Its record is murderous at worst, criminal on average, and disgraceful at best. Your present enemies are not in any way, shape or form atypical. Except of course that the Soros people have done so much for their PR.

Here is how to abolish politics: involuntarily retire all Pakistani judges, journalists and editors, teachers and professors, NGO employees, and politicians. Pardon them fully and unconditionally for any crimes they may have committed. In fact, award them half-pay pensions for their service to Pakistan, which was counterproductive but often sincere.

Seize and permanently confiscate all media and publishing firms in Pakistan, all party buildings and funds, all private schools and universities, and all nongovernmental organizations. Abolish the parties permanently. Reorganize and rename the schools and universities, confining their mission to science and engineering. Import Western or Western-trained scientists and engineers, at competitive salaries, to bootstrap university departments. Put army officers in charge of the NGOs, and handle them case by case.

Invite any Pakistani entrepreneurs who feel sympathy with the old regime to join this purge. They can sell their companies to the Pakistani state for their full present market value. You can pay for this by printing money – cancelling the proceeds when you reprivatize the company will equalize the inflationary balance. Let anyone who is considering selling know, however, that the offer will not be repeated.

Three, expel all Western official journalists, and imprison or expel (their choice) the stringers. Make any contact with the Western official press illegal.

Pakistan is a modern, civilized country. Or at least many parts of it are. It is not North Korea, it cannot be turned into North Korea, and it should not be turned into North Korea. Pakistan cannot be made opaque to the West.

However, the West can be compelled to get all its news from Pakistan via the Internet. There will be both pro-military and anti-military Pakistani bloggers. Some of them may even be the journalists you have just retired. This is totally fine and normal.

Except inasmuch as they are directly organizing violence, demonstrations, rioting, etc, do not interfere in any way, shape or form with bloggers. Censorship is difficult to reverse, because when you lift a system of censorship, you look weak. And when you impose censorship, you also look weak. So you get it both ways, as we say in San Francisco.

In fact, it might be a good idea to run official contests for the best supportive, neutral, and dissident blogs, using independent judges and awarding fat prizes. Your goal is to create a situation where anti-government intellectuals have nothing to complain about except the fact that they are not in charge of the government – and in which this fact has no conceivable prospect of changing.

Once this is achieved, your enemies can blog up any kind of storm, without threatening the state in the slightest. As Bismarck put it: “they say what they want. I do what I want.” This was probably not really true for Bismarck. But there’s no reason you can’t make it true for you.

Four, declare independence from the West. Starting now, politely decline all aid, military or financial, from any Western country. You won’t be able to buy Western-quality arms or parts anywhere, but you can get stuff almost as good from Russia and China.

Follow Putin’s lead in prohibiting any financial traffic or organizational affiliation between any Pakistani organization and any non-Pakistani, except of course for genuine commercial or financial links. The NGOs are your enemy. There is no way to buy them off. It’s them or you.

Five, announce that you will respond to any invasion of Pakistan with a nuclear strike on Delhi. This is known to be within your plausible power. It is sufficient to deter the West. And it will not strike Westerners as aggressive, except possibly toward India.

Make peace with India by unconditionally accepting the status-quo Line of Control in Kashmir as the permanent international border. Open talks on the technical details of normalization.

For your new nuclear posture, your objective is defense against any adversary with stronger conventional and nuclear forces. Declare that your standard response to any sustained infringement of Pakistani sovereignty will be to destroy one foreign city, perhaps Delhi although anything big will do, then surrender unconditionally.

The key to this strategy is that it is plausible – an attacker has no good reason to doubt that you will follow through. The goal is not to win a war, but to prevent one from happening. The adversary has to decide which he prefers: (a) the status quo, or (b) the status quo, plus ownership of Pakistan – but assuming the destruction of one city. Ideally his own, but any hostage will do.

In my humble opinion, as long as Pakistan is not itself behaving aggressively, there is no superpower on earth today that would even consider considering (b). Perhaps such a power is conceivable. But it is hard to conceive, given how demented its rulers would have to be.

Six, crush the Islamists. Give any armed organization on Pakistani territory thirty days to disarm and surrender, flee the country, or be destroyed by the Pakistani Army. You are equally amenable to all of these options. Offer unconditional amnesty to all rebels who surrender within this period.

Require all Islamic schools to register, and all Islamic teachers and scholars to be licensed, by the State. Prohibit them from promoting violence. Pay them for their good work.

Fortify the border with Afghanistan, sealing it except for border posts, until further notice. The Americans will be really pissed at you for a while, but they are not utterly stupid, and they will be happy with the results. Suggest that the Americans add their own layer of fence, so the border will be double-sealed, and allow them to do this with Pakistani labor if needed. There is no good reason to allow informal pedestrian traffic across the Durand Line.

Seven, for extra credit, declare that the future of Pakistan looks like Dubai, only better. Not all Pakistanis have been to Dubai, but they pretty much all get the idea.

You can get a leg up on Dubai by converting Pakistan into the world’s first sovereign corporate republic. An SCR is a little like the monarchist structure used in the UAE, except that it works even better. It’s a government design that should be at least as efficient as any modern Western corporation. It is designed to be invulnerable to any kind of systematic corruption. While the thing has never been tried and its success may be debatable, the SCR design certainly scales much better than the old medieval family-business approach.

In my humble opinion, a Pakistani SCR will make Dubai look backward. Your goal should be nothing less than a new equivalent of the Mughal period. Westerner tourists should be astonished and envious when they see Pakistan, as they already are in Dubai. Except more. The region now Pakistan was once one of the jewels of the world. It can become one again.

Any Pakistani SCR must start with a single initial owner: the Pakistani army. At present, this is unavoidable, because the army holds all physical power in the country. Formal and informal power should always be identical. However, military rule is not a desirable structure over the long term – not for the military, and not for anyone else.

Therefore, the army should convey ownership of the Pakistani corporate republic to its own officers (active and retired) and soldiers, distributing shares by rank and seniority. Whatever this distribution, it must be final – there are no further automatic dilutions. All new hires are just employees, whatever their rank.

A state, like any organization, is stable and efficient when those who own it are those who control it. However, this does not mean the owners and the employees must be the same people. If agent (employee) and principal (owner) can separate, the state will be much more stable and much more efficient. Owners need not even be residents of Pakistan, although this restriction should be retained for the foreseeable future – the twentieth century is not dead yet.

But in principle, any geographical pattern of residency among sovereign owners is undesirable. For maximum stability in a corporate republic, shareholders should be distributed around the financial world. Thus, there is no method by which a subset of shareholders can benefit themselves, and only themselves, by using their voting power to induce the republic’s managers to mismanage it in a way that produces selective profit.

Selective profit exists whenever a corporation’s dividends are not distributed formally and equally among its shares. Selective profit is always and in every case corruption. If a company favors one subset of shareholders, or of creditors in general, in any way not contractually specified, it is corrupt. ( The other general form of corporate corruption is agency profit, in which employees abuse their power of agency to skim off cream which should be going to the principals. Agency profit in governments is much better understood.)

Since selective and agency profit are generally (contrary to popular belief) rare in the Western corporate world, they should be equally easy to defeat in a sovereign corporate republic. Pakistan today has a reputation for corruption. In an SCR, this reputation will adhere to its proper target – the old constitution. The goal of any newly established SCR is to move to #1 on international transparency rankings, and stay there.

Eight, for serious extra credit, create at least one special economic zone whose currency of both exchange and accounting is gold. You may be surprised at how many people this annoys, and how much it annoys them. You may also be surprised at how profitable it will be for Pakistan.

To be precise, a 21st-century gold standard implies a 100%-reserve banking system run on the principles of Austrian economics, with strict maturity matching on all loans of any kind. This is not unlike certain interpretations of Islamic finance, and perhaps the point could be finessed.

Transitioning from a fiat currency to a gold standard is tricky. It’s not unlike landing a plane. There are many ways to do it wrong, and one way to do it right. However, once the problem is solved correctly, it remains solved indefinitely.

And, at least if the Austrian analysis is correct, it is very clear that the first sovereign state to succeed in the transition will have at least the option of becoming the new financial capital of the world, as London was in the 19th century and New York for most of the 20th. You might want to talk to Benn Steil – I bet he has some ideas for how to pull it off.

(Update: please see the comment thread. There are many interesting discussions. I promise that I will actually answer questions in a reasonably prompt and diligent manner!)